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Mortgage lending increased by 5% in the UK

The Council of Mortgage lenders have reported a 5% increase in gross mortgage lending in the UK during the first quarter, partially due to the number of people remortgaging their homes.

The amount advanced to borrowers remortgaging increased by 10% in April when compared to March figures making a total of £3.4 billion. Although the figures have increased over April, the total is still 3% lower than last year’s, yet the rate that figures are falling is decreasing.

In contrast to the increase in the number of people remortgaging, house purchase lending decreased over April. First time buyers have accounted for much of the lending during this month, with 19,400 loans worth a total of £2.5 billion being arranged, however these figures were down by 1% since March. Overall, market activity has increased by 11% in the first four months of this year when compared to the first quarter of last year.

Approximately 46% of house purchase loans were arranged for first time buyers in March and April which is a significant increase from the 38% of loans advanced to first time buyers in 2007. Although first time buyers borrowed 3.25 times their income in April, (a slight increase from March) their loans took up only 19.1% of their income compared to 19.3% in March.

Home movers borrowed £3.8 billion in loans in April which is a 1% decrease from March but a 4% increase from April 2012. There was a 1% increase in house purchase activity overall in the first quarter when compared to last year’s figures, not accounting for the distortion seen at the end of the stamp duty concession. Lending to first time buyers is at a higher level than last year and the typical amount borrowed has increased. This means that the value of loans remains constant with last year’s figures.

There has been a recent increase in new lenders coming onto the market and many new products are now being offered. In addition, mortgage rates have fallen and these developments have all contributed to the rise in lending. Many current home owners are taking advantage of these developments to remortgage their homes while many first time buyers are attracted to the property market as a result.

These figures look positive due to the increasing amount of first time buyers jumping on the property ladder. The Help to Buy scheme may help more first time buyers purchase a property but it is yet to be seen how government initiatives like these will affect the housing market as a whole.

Buying Houses since 1972